In a long-awaited ruling, the US Court of Appeals for the DC Circuit trimmed the expansive scope of the Telephone Consumer Protection Act (TCPA). The appellants, in ACA International v. Federal Communications Commission (FCC), challenged the FCC’s July 2015 Omnibus TCPA Declaratory Ruling and Order (2015 TCPA Order), which had, among other things, expansively defined “automatic telephone dialing system” and afforded callers one opportunity to call a cell phone to determine whether the number had been reassigned, whether or not the cell subscriber answered the phone. The decision in ACA International should narrow the scope of potential TCPA liability by, among other things, more narrowly (and rationally) defining what constitutes an autodialer, and by taking a more practical approach to the rules regarding calls to the millions of cell phone numbers that are reassigned each year.

More specifically, the court considered four sets of challenges to the 2015 TCPA Order, striking down two parts of the FCC’s TCPA rules while upholding two others. Specifically, the court:

• Struck down the FCC’s overbroad definition of autodialer;
• Set aside the FCC’s rules on calls to reassigned cell phone numbers;
• Upheld the FCC’s ruling that a party can revoke consent through any reasonable means (while also suggesting that parties may by mutual consent agree to the manner in which consent may be revoked); and
• Upheld the scope of the FCC’s exemption for time-sensitive, healthcare-related calls.

These decisions and their key implications are discussed below.

1. The Definition of Autodialer and the Scope of the TCPA.

"It cannot be the case that every uninvited communication from a smartphone infringes federal law, and that nearly every American is a TCPA-violator-in-waiting, if not a violator-in-fact."

On the most significant issue with the most far-reaching implications—the FCC’s expansive definition of autodialer—the court unambiguously rejected the FCC’s broad definition. The court held that the 2015 TCPA Order “falls short of reasoned decision making in ‘offer[ing] no meaningful guidance’ to affected parties” on whether their equipment is covered by the TCPA restrictions. The TCPA generally makes it unlawful to call a cell phone using an automated telephone dialing system, or ATDS, and defines an ATDS as equipment with the capacity to perform each of two enumerated functions: (i) storing or producing telephone numbers “using a random or sequential number generator” and (ii) dialing those numbers. In the 2015 TCPA Order, the FCC defined capacity to include “potential functionalities,” including potential modifications such as software changes, rather than limiting the scope to present capacity. The appeal challenged the expanded definition as impermissibly vague and imposing liability beyond the original intent of Congress when it enacted the TCPA in 1991.

The court agreed with the appellants in finding that the FCC’s definition would include not only traditional calling equipment, but even a typical smartphone would fall within the FCC’s overly broad definition of autodialer. It is undisputed that by downloading an app, nearly any modern phone can make automated calls. Based on this fact, the court eviscerated the FCC’s expansive definition as “eye-popping” and unreasonable, because it would cover “the most ubiquitous type of phone equipment known, used countless times each day for routine communications by the vast majority of people in the country,” and would leave every smartphone user open to TCPA liability for sending a call or text without prior consent. That result would yield a “several-fold gulf” between the statute’s intent and its application, and render nearly every American a serial TCPA violator. The TCPA was enacted to curb abuses by telemarketers, not to constrain “hundreds of millions of everyday callers.” The court concluded that, in this regard, the 2015 TCPA Order was arbitrary and capricious.

The court also pointed to other inconsistencies and unanswered questions that left businesses “in a fog of uncertainty about how to determine if a device is an ATDS.” On the issue of whether a device qualifies as an ATDS only if it can generate random or sequential numbers to be dialed, the court observed that the FCC provided “no clear answer (and in fact seems to give both answers).” On the element of human intervention, the court observed that under the FCC Order, the basic function of an autodialer is to dial numbers without human intervention, but “a device might still qualify as an autodialer even if it cannot dial numbers without human intervention.” The court stated that “[t]hose side-by-side propositions are difficult to square.”

Implications of the Court’s Ruling

Although the court struck down the FCC’s definition, the decision does not immediately put in a place a new definition. Unfortunately, this means there will be a lack of clarity about what functions qualify a device as an autodialer. With the FCC’s definition now set aside, it is unclear exactly what features are required elements of an ATDS, and which features would take a calling system outside the scope of the TCPA. Nor is it clear what level of human intervention in a call will disqualify a device as an ATDS. Finally, the court specifically declined to address whether the TCPA applies to non-automated calls (i.e., manually dialed calls) made with a device that otherwise qualifies as an autodialed based on its capacity. These issues are likely to be reconsidered by the FCC, although there is no timetable for doing so. 

2. Calls to Reassigned Cell Phone Numbers.

"We set aside the [FCC’s] interpretation [of TCPA liability for calling reassigned cell phone numbers] on the ground that the one-call safe harbor is arbitrary and capricious."

The court also struck down the FCC’s rules on the intractable problem of calls to reassigned cell phone numbers. Perhaps no issue has caused more unintended problems under the TCPA than reassigned cell phone numbers. Millions of wireless numbers are reassigned every year, but there is no systematic and reliable way for callers to track those reassignments. This situation has left callers facing a potential liability trap solely based on routine, good faith communications directed to their own customer lists.

Under the 2015 TCPA Order, a caller could be strictly liable for a call to a reassigned cell phone number even where the caller had consent from the prior subscriber and the call to that number was made on the good faith belief that the caller was trying to reach the original subscriber. What’s more, the “safe harbor” is anything but—it is limited to one call, regardless of whether the caller obtained any information from that call that would give it any reason to believe that the number was reassigned. Although the FCC is working on new rules for a database to track reassigned numbers, businesses are not presently able to track when a subscriber has relinquished his or her cell phone number, or whether that number has been reassigned to another user.

On appeal, the DC Circuit found that the FCC’s one-call safe harbor rule is arbitrary and capricious. As the court observed, the FCC itself acknowledged “that even the most careful caller, after employing all reasonably available tools to learn about reassignments, may nevertheless not learn of reassignment before placing a call to a new subscriber.” And the FCC failed to “give some reasoned (and reasonable) explanation of why its safe harbor stopped at the seemingly arbitrary point of a single call or message.” Instead, the court questioned why a “reasonable reliance” standard was not adopted, to protect callers who rely in good faith on the consent from the prior subscriber when making the call.

Implications of the Court’s Ruling

The court’s ultimate holding on this issue is particularly helpful for businesses. Rather than simply striking the one-call safe harbor, the court found that the appropriate remedy was to set aside the FCC’s treatment of reassigned numbers in its entirety. The court noted that the FCC is already working on a regime for allowing tracking of reassigned numbers, so the court may expect that the FCC will revisit its rulemaking approach on this issue to be more realistic.

3. Revocation of Consent Rules Upheld

After striking down the 2015 Order on two key issues, the court upheld the FCC’s rulemaking on standards for revocation of consent. The FCC had concluded that consumers may revoke consent to be called “by any reasonable means.” This rule precluded callers from unilaterally prescribing the exclusive means for revocation. The court held that this was a valid exercise of the agency’s rulemaking authority, and the court rejected the appellants’ argument that tracking opt-outs through many channels would cause undue burden. Instead, the court opined that the rule would incentivize callers to offer convenient opt-out methods, and that consumers’ attempts to opt out by unconventional means should be viewed as unreasonable.

Implications of the Court’s Ruling

The court limited its holding, and its interpretation of the FCC Order, to apply only to unilateral imposition of revocation rules by callers, in contrast to conditions set by contract. The court stated that its decision “does not address revocation rules mutually adopted by contracting parties” and “nothing in the Commission’s order thus should be understood to speak to parties’ ability to agree upon revocation procedures.” The decision in ACA International leaves intact revocation standards agreed to by contract, including the Second Circuit’s standard that consent is not revocable at all if included as a term of a written contract. See Reyes v. Lincoln Automotive 861 F.3d 51 (2nd Cir. June 22, 2017).

4. Limits on Health Care Exemption Survive

Finally, the court upheld the FCC exemption on calls to wireless numbers “for which there is exigency and that have a healthcare treatment purpose.” One of the petitioners challenged the limited scope of the exemption, which applies only to time-sensitive calls that have a healthcare treatment purpose, specifically, such as appointment and exam confirmations and reminders, wellness checkups, hospital pre-registration instructions, pre-operative instructions, lab results, post-discharge follow-up intended to prevent readmission, prescription notifications, and home healthcare instructions. The exemption does not cover calls “that include telemarketing, solicitation, or advertising content, or which include accounting, billing, debt-collection, or other financial content.” On this issue, the court upheld the 2015 TCPA Order, finding that the FCC was empowered to draw a distinction between different types of calls.

Eversheds Sutherland Evaluation: What Does It All Mean?

Assuming it becomes final in its current form, the implications of the court ruling are significant.

First, the decision could result in a significantly narrowed TCPA, most notably with respect to the definition of what constitutes use of an autodialer. Since the FCC issued its 2015 TCPA Order, courts have struggled to apply the standard in pending cases, while businesses have grappled with questions about whether their calling equipment falls within the restrictions set by the TCPA. A revised definition from the FCC would—hopefully—provide clarity, and any new standard is almost certain to be narrower and more clearly defined than the FCC’s 2015 definition.

Second, assuming the FCC chooses to craft a new definition of autodialer, the new rule will be set by a politically reconstituted FCC, where the dissenting commissioners from 2015 are now in the majority. With the shift to Republican control of the administration after the 2016 election, former minority commissioner Ajit Pai is now Chairman of the FCC and leads a 3-2 Republican majority on the commission. In 2015, Chairman Pai, along with Commissioner Michael O’Rielly, was strongly critical of the approach taken by the FCC in the 2015 TCPA Order, and he issued a harsh dissenting statement at the time the 2015 TCPA Order was issued. This history suggests that the new FCC could go in a very different direction from the 2015 TCPA Order.

Third, the decision may foreshadow the end of the ongoing wave of litigation based on calls to reassigned cell phone numbers. These lawsuits have been a trap for businesses which are operating in good faith and which have had essentially no way to avoid making at least some calls to reassigned cell numbers. Combined with the FCC’s new effort to create a tracking system for reassignments, the court’s decision to invalidate the rule on reassigned numbers may ultimately provide relief to businesses on this issue.

Fourth, defendants in TCPA class actions will use this ruling as new ammunition in their defense of ongoing cases, many of which have been stayed as parties and courts awaited the DC Circuit’s ruling.

Finally, it bears mentioning that the DC Circuit’s decision is not yet final. Either side may ask for reconsideration by the Circuit en banc. A petition for rehearing must be made within 45 days (given that the US government is a party), and either side may file a petition for certiorari to the US Supreme Court within 90 days of entry of judgment of this decision or an en banc decision, should one be issued.

In most other cases, an appeal by the US government would be a virtual certainty. In this case, however, now that the FCC is controlled by Republican commissioners, the FCC may welcome the DC Circuit’s decision in ACA International.

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